Prepaid phones are fastest-growing segment of wireless

They are no longer just for `the no-credit, poor-credit population'

May 18, 2004|By THE BOSTON GLOBE

Prepaid wireless phones, once regarded as a last-resort option for those with bad credit, are suddenly hip.

More and more consumers, particularly the young and the old, are viewing prepaid wireless as a smart choice, a way to stay connected without having to sign a long-term contract with a wireless carrier.

For as little as $40 to $50, consumers can buy a phone and start making calls on a pay-as-you-go basis.

Calling rates are generally more expensive than with contract plans, but prepaid can be ideal for infrequent users or people who want to manage their wireless spending.

"There used to be a stigma that prepaid was for the no-credit, poor-credit population," said Jeff Schlueter, executive director of product management at Cingular Wireless. "That's not true anymore."

Prepaid has become the fastest-growing segment of the wireless market.

Virgin Mobile USA, a prepaid service that caters to the youth market, has grown to 1.75 million customers in less than two years, making it one of the fastest-growing wireless companies in the country.

7-Eleven, the national convenience store chain, has gone from selling other companies' prepaid phones and cards to marketing its own customized product.

The "Speak Out" service, available now in Boston and Providence and being rolled out nationwide this summer, should expand the market further.

The Yankee Group, a Boston consulting firm, is forecasting the prepaid subscriber base to grow 70 percent to 24.8 million customers by the end of 2007, while the much larger post-paid market is expected to expand less than 5 percent to 150 million.

As the prepaid business expands and new companies enter the market, calling rates keep coming down and the length of time before minutes expire keeps going up.

But some customers still aren't satisfied.

Ann Zawistowski and her husband, retirees from Walpole, Mass., received a Verizon wireless phone and phone card as a gift from their daughter to use for emergencies. The problem is they don't have that many emergencies.

Their Verizon card costs $30 and lasts two months. Any unused time can be rolled over for another two months by buying another card, but Zawistowski said the unused minutes are starting to add up.

Why, she asks, can't a prepaid wireless phone card last two years, the same as her prepaid long distance card from BJ's Wholesale Club?

"This gets expensive because we don't talk on the cell phone as a general rule," she said in an e-mail message.

"Also, I hadn't planned on spending $15 a month on a cell phone. We are seniors and I can think of other things to spend money on."

At most carriers, minutes are easy to purchase online, by phone, or via prepaid cards sold at numerous retailers.

Some carriers also offer plans that automatically charge credit cards to replenish minutes.

Nearly every carrier allows a subscriber to reactivate his phone at no charge if he lets his minutes and phone number lapse.

Most carriers also offer a two-month grace period before they actually cancel a customer's minutes.

For consumers who want a prepaid wireless phone for more than security, there are many options.

With the exception of 7-Eleven, which charges a flat 20 cents a minute, the charges of most carriers tend to mimic their contract plans, with peak and off-peak rates.

The prepaid offering of Verizon Wireless, for example, charges 30 cents a minute weekdays, 15 cents a minute on nights and weekends, and 15 cents a minute for mobile-to-mobile conversations.

Cingular offers three prepaid plans, catering to different types of calling needs. Its standard calling plan is 35 cents a minute peak and 10 cents a minute off-peak.

Virgin Mobile's prepaid plan charges 25 cents a minute for the first 10 minutes of use and 10 cents a minute thereafter.

Tracfone's charges vary from 50 cents a minute to 20 cents a minute, depending on the type of card purchased.

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